Major mortgage servicing deal halted by NY regulator

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New York’s top financial regulator has halted Wells Fargo’s planned sale of mortgage servicing rights to Ocwen, sending the company’s shares tumbling more than 5%.

Wells Fargo had agreed last month to sell the servicing rights on more than 184,000 loans to Ocwen, but Benjamin Lawsky, head of New York’s Department of Financial Services, expressed concern that Ocwen wouldn’t be able to properly service the $39bn in loans, according to a Bloomberg report. Ocwen has agreed to put the deal on “indefinite hold,” the mortgage banker said in a statement.

Ocwen, along with Nationstar Mortgage Holdings and Walter Investment Management Corp., have been among the most active firms in snapping up servicing rights as big banks pull back from the servicing market. Wells Fargo is the latest lender, joining Citigroup and Bank of America, to take steps to reduce its involvement in the market as tough new regulations make holding the assets more expensive.

Ocwen is the fourth-largest mortgage servicer in the U.S., according to Bloomberg. The company, howeve3r, has been plagued with allegations that it has mishandled borrowers’ loans. As part of a settlement with regulators last year, Ocwen agreed to pay $2.1bn in relief to homeowners, Bloomberg reported.